Weakness in tech stocks

weighed down broader

United States indexes

on Friday, as investors started 2026 on cautious footing.

The Nasdaq 100 was lower after rising more than one per cent earlier in the session. The S&P 500 Index also fell, reversing previous gains. Shares of Tesla Inc. tumbled after the company reported deliveries for the fourth quarter that missed the average analyst estimate, while Amazon Inc. and Microsoft Corp. slid. A Bloomberg gauge of

Magnificent Seven stocks

sank by about one per cent.

Software stocks were among the biggest decliners, continuing a trend from 2025 that saw investors shun the group amid concerns about disruption from

artificial intelligence

. There were pockets of strength as well, with some semiconductor equipment makers and other chip stocks rallying, including Nvidia Corp. and Micron Technology Inc.

Market participants “aren’t necessarily cautious,” said Steve Sosnick, chief strategist at Interactive Brokers. However, “they may be fully invested going into the new year.”

The wary start clashed with the optimistic tone most strategists struck at the end of 2025, when tech and AI helped power the S&P 500 to a third year of double-digit gains. Forecasts signal more of the same for 2026 despite lingering wariness over already stretched valuations and fears that vast amounts of capital expenditure could fail to pay off.

“The scope for further gains driven purely by valuation tech expansion in 2026 may be limited,” wrote Linh Tran, an analyst at XS.com. “Shocks related to interest rates, earnings, or policy could therefore trigger faster and more pronounced corrections than in earlier phases of the cycle.”

In Treasuries

, the 30-year yield hovered around its highest level since September while the 10-year yield also rose. Precious metals unwound earlier gains, with gold prices lower and silver little changed. The dollar was flat against a basket of currencies. Bitcoin rose two per cent.

Day One

The S&P 500 has recorded declines on the first trading days of the previous three years. Since 1953, the S&P 500’s median change to kick off a new year has been a 0.3 per cent drop, with gains less than half the time, according to a note by Bespoke Investment Group.

What Bloomberg strategists say…

“In years when the S&P 500 rose in January yet failed to rally in December, returns were pretty mixed. Ultimately, seasonality offers little guidance. Earnings might help, but the fourth-quarter season doesn’t kick off until mid-January. That leaves stocks trading with little direction, guided mainly by business surveys and shutdown-impacted economic data.”

— Tatiana Darie, Macro Strategist, Markets Live. For the full analysis, click here.

Strategists at Deutsche Bank noted that several key themes apart from AI will shape markets in 2026, including new developments in U.S. trade policies and specifically a Supreme Court case that will rule on the legality of levies. The Fed will be another major focus, with President Donald Trump expected to name a successor to Jerome Powell early in the year.

Barclays PLC warned equity markets could get choppy as they enter 2026 at record highs that are “over-reliant on AI success.” The team still expects further gains this year, thanks to resilient corporate earnings and a favourable trade-off between growth and monetary policy.

Bank of America Corp. strategists see the S&P 500 hitting 7,100 this year, a roughly four per cent gain from its current price.

The “growing capital-intensity of big tech spenders that make up an outsized share of the index, elevated multiples, plus cracks in the labour market (with further downside linked to AI upside) argues for a more cautious stance,” they wrote.

  • From gold to the world’s largest company, 5 predictions for 2026. Plus, see how we did on 2025 forecasts
  • ‘I think time is running out’: How to survive a market bubble — if there is one

This story was produced with the assistance of Bloomberg Automation.

—With assistance from Anand Krishnamoorthy, Subrat Patnaik, Rheaa Rao and Isabelle Lee.

Bloomberg.com